June 6, 2024

Zillow: The Future of Home-Flipping Content?

“We know who you are and where you live. We already have a mortgage ready to go. We have an offer ready for your house when you’re ready to transact and you, with one click, can decide to move.”

Nourhan Sandouk

Photo Credit: hapabapa/ Istockphoto

“We know who you are and where you live. We already have a mortgage ready to go. We have an offer ready for your house when you’re ready to transact, and you, with one click, can decide to move.”

These were Zillow CEO Richard Barton’s words in an interview with CNBC confirming what was for him a one-of-a kind, trade-in experience and what actually turned Zillow into what some called a symbol of America’s real estate obsession.

So, what really happened after Barton enthusiastically announced that the online real-estate marketplace would be entering the lucrative house-flipping business?

The Path To Zillow’s Home-Flipping

In April 2018, the company entered the tenderfoot on-demand home buying market with a service called Zillow Offers, and it expanded to 25 cities across 12 states, including California, Texas, Georgia, North Carolina, Ohio, Colorado, Florida, Nevada, Minnesota, Tennessee, Arizona, and Oregon.

Zillow Offers provided a fast, hassle-free option for eligible home sellers by providing a cash offer in just two days. Two local experts also provide input on each house, and if the seller likes the initial offer, a Zillow employee comes to inspect the property. 

In exchange for this, Zillow Offers charged an average service fee of 7.5%.The service fee covered Zillow's carrying costs when reselling homes. Despite its high service fee, Zillow once had the second-highest transaction volume among iBuyers, with a total of more than 6,000 transactions in 2019.

A New Content Marketing Machine?

Moreover, by offering a program like "Offers," Zillow positioned itself as an authority in the real estate market. It provided valuable information and tools (think: estimates, market data) to potential buyers and sellers, making them a trusted resource throughout the entire process. 

Zillow Offers created a reason for users to stay engaged with the platform beyond just browsing listings. Whether considering buying or selling, users could get an instant offer on their home through Zillow, encouraging them to return and explore other features.

This content marketing strategy helped Zillow in a few ways:

  • Attract More Users: Valuable content like Zillow Offers attracted new users who were interested in buying or selling a home.
  • Increase User Engagement: By providing tools and fostering an informative environment, Zillow kept users coming back to their platform.
  • Generate Leads: Zillow could leverage the user data collected through Offers to connect buyers and sellers with real estate agents and other services.

From Zillow Offers … And Beyond!

Once Zillow gets a property, within 90 days, modest repairs are done. Then, the home is up for resale. 

The results of Zillow Offers clearly gave the ambitious founder and CEO Barton a green flag to go further. Plans to expand the service were announced with high expectations to bring in up to $20 billion in annual revenue within three to five years, and the company had no choice but to go big to give Zillow Offers a shot at success.

Think of it as high-tech home flipping, a process that nearly all reality TV house-flipping shows make look easy.

But Zillow’s site offered some sage advice to flippers that, in retrospect, felt almost like Shakespearean foreshadowing: “When buying a flipped house, you could be getting a home that’s been extensively updated and requires little work. Or you could buy a money pit that requires expensive repairs if the work is shoddy or the home has serious issues lurking beneath that new coat of paint.

When Flipping Flops

Zillow actually had more success buying homes than reselling them. 

In the program’s first nine months in 2018, Zillow purchased 686 homes and sold just 177 of them at an average price of $295,800, bringing in $52.4 million, with a pretax loss of $62.4 million. 

In the first quarter of 2019, Zillow purchased 898 homes and sold 414. Home revenue for the quarter was $128.5 million, with a pretax loss of $45.2 million. Zillow ended the quarter with 993 homes in inventory, worth approximately $325 million.

Then Barton’s project ran into an unexpected wall. As it neared the COVID-19 pandemic, it faced an operational backlog. The supply chain and labor issues slowed its ability to renovate homes quickly.

This Zillow phenomenon even made an appearance on Saturday Night Live, where cast members showed interest in listings they had no intention of buying “Need a new fantasy? Then you need Zillow.”

Fast-forward to 2021, Zillow’s much-lauded algorithm was struggling to make accurate pricing predictions, and the company began overpaying for homes all across the country.

The company has mentioned that it targeted homes priced between $200,000 and $400,000, a range often favored by first-time buyers, which made Zillow part of a larger wave of private investors who impacted enormously home values during the pandemic.

In November 2021, Barton again made an announcement regarding Zillow Offers. This time, however, it was to let the market know that the company would be shuttering the venture after losing $1 billion in the preceding three years.

The End of The Economic Storm

“I actually think in stormy weather, it’s when leaders are the happiest. It’s when the value of what we do as leaders is high,” Barton said in an exclusive interview with GeekWire.

He also mentioned that the company, which held $3.4 billion in cash and investments at the end of 2022 and attracts nearly 200 million monthly visitors to its real estate sites, is well prepared for future opportunities.

Barton wants to make the most of this tectonic shift, calling it “double jeopardy” time. 

“Scores can really change now,” he said.

Zillow's 2024 housing market predictions report says buyers may be more willing to purchase a home that needs a little sprucing up than in the past, thanks to housing inventory being below pre-pandemic levels.

Today, the company has a $9.5 billion market cap, and Barton’s stake (the largest held by any individual) is worth $700 million.

From Home Envy Scrolling to Actual Homebuying 

Zillow Offers may have been demolished, but it left an important blueprint behind at Zillow. It showed that the company had strategic value as a content marketing machine beyond just being a haven of expensive mansions and haunted homes to scroll through like a Pinterest board of homes users will never actually buy. Rather, it gave Zillow the structure for a sturdy foundation of something that’s far more interactive and that could actually engage and keep users coming back for more. 

Here's how the shuttered project can still be seen as a content marketing win for Zillow, even though it's not actively available anymore:

  1. Proof of Concept: Zillow Offers existed for a period of time, and while it may not be around now, it served as a successful test. It demonstrated the effectiveness of offering valuable content beyond listings and showed user interest in such tools. Zillow can leverage this knowledge to inform future content strategies.
  2. Brand Reputation: Even though Zillow Offers itself is gone, the concept can linger in the minds of users. They might remember Zillow as a platform that went beyond just listings, creating a more positive brand perception.
  3. Content Marketing Strategy: The core ideas behind Zillow Offers – providing actionable content and engaging a wider audience – can still be applied to other Zillow features and content. They can use the learnings from Offers to create a more well-rounded content marketing approach.

So, while Zillow Offers may not be a current program, it still holds value as a strategic move that helped Zillow showcase its potential as a content marketing platform.

Nourhan Sandouk

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